Posted: September 15, 2014
HM Revenue and Customs (HMRC) has announced how automated in-year penalties for late real-time PAYE returns will be phased in.
The HMRC announcement says employers with fewer than 50 employees will face automated in-year penalties for late real-time PAYE returns from 6 March next year.
Those who employ 50 or more people will face penalties from 6 October 2014.
HMRC will send electronic messages to all employers shortly to let them know when the penalties will apply to them, based on the number of employees shown in the department’s records.
The deadline for filing the RTI submissions is the date of payment, in simple terms pay day.
The report is required to be made each time you make a payment and therefore if you pay weekly, a submission needs to be each week and cannot be combined into a monthly submission. If you pay more frequently than weekly, then technically a report should be made each time a payment is made.
Penalties can be charged when either:
- your Full Payment Summary (FPS) was late
- you didn’t send the expected number of FPS’s (i.e. monthly or weekly)
- you didn’t send an Employer Payment Summary (EPS) when you didn’t pay any employees in a tax month
The levels of penalties are dependent on the number of employees the business has and are as follows:
Number of employees
1 to 9 £100
10 to 49 £200
50 to 249 £300
250 or more £400
Also if the submission is more than 3 months late, there is also potentially an additional charge being 5% of the PAYE and National Insurance that is reported on the return.
HMRC won’t charge a penalty if it is either your first late report of the tax year or you are a new employer and you sent your first FPS within 30 days of paying an employee.
Notification of penalties
HMRC will notify Employers of any penalties in January, April, July and October of each year and this will detail the late submissions in the previous quarter.
If for example an employee with more than 250 employees on a monthly payroll submitted the 3 monthly FPS’s in the period October to December late, then potentially they would receive a penalty notice in January for £1,200 (being 3 late submissions at the penalty rate of £400).
Appealing Penalties When HMRC sends penalty notices in July, October, January and April. A notice will include what you owe, how to pay and what to do if you don’t agree with the decision.
If the penalty is not paid or appealed within 30 days of getting the notice then interest will be charged on the late payment.
From October 2014, employers will be able to appeal online against the late filing penalties, using HMRC’s Online Service. In some cases, HMRC will accept and settle the appeal automatically. These are some of the reasons that can give as grounds for appeal:
- filing expectation incorrect
- filed on time
- fire/flood/natural disaster
- ill health
- IT difficulty
- missed correction/easement
- no longer have any employees
- no payments to employees
Errors that arise, despite taking reasonable care, attract no penalty at all and penalties for errors due to failure to take reasonable care can be reduced to zero with full and unprompted disclosure to HMRC. Where HMRC discovers careless or deliberate errors, the penalties that could apply will be based on the behaviour that led to the error and the amount of potential lost revenue for that return.
The RTI submission will include the Pay date and this is what HMRC will compare to the date of the RTI submission to assess whether this is late and penalties apply. This does mean that it is important to take care to ensure the Payroll Software is correctly recording the Pay date and it is important to ensure the Software that you are using is updated to allow this function